How the best divest: Unlocking more value

Willis Towers Watson’s Divestment Performance Monitor

Over half of the companies that engaged in divestments between 2010 and 2018 lost shareholder value, according to new research conducted by Willis Towers Watson in partnership with Cass Business School.

Over 5,500 divestment deals, each worth over $50m in value, completed worldwide from 2010 to 2018, with a combined value of $3.9trn.

of these deals underperformed market indices as measured by the study. The remaining 46% outperformed.

Based on share price performance, companies engaged in divestment deals on average underperformed the Global Index by -2.1pp between 2010 and 2018.

Poor seller performance in the divestment market is in marked contrast to buyers, who saw deals outperform the market by 3.1 percentage points, reinforcing the view that most corporations are geared up to buy assets, not sell them.

Making deals work

Analysis of the data since 2010 shows that the value added by the minority of successful sellers ($2trn of outperformance from 46% of sellers) marginally exceeded the underperformance of the majority that struggled ($1.9trn from 54% of sellers).

Many of the better performing separations have been spin-offs — such deals are often justified by segmenting a successful business to better demonstrate its value separately from the parent.

In our view, this supports the value of pre-deal preparation and the importance of business leaders engaging, both internally and externally, on the rationale for the deal to clearly demonstrate the value of a division being sold and the prospects for the remaining business.

For insights on how to navigate the selling process, download our full report.